Interview with Henry Paulson and Robert Rubin; Comparing Situation in the Balkans 100 Years ago to Current Crisis in Middle East; Austin's Changing Demography

Aired June 29, 2014 - 10:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

FAREED ZAKARIA, HOST: This is GPS, the GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

Let's start today with sky high temperatures, hundred-year floods and severe storms. A terrific new report tallies up the costs to you and me and everyone from climate change. I will talk with two of the many high-powered people behind the study, two former treasury secretaries, one Republican, one Democrat. Hank Paulson and Bob Rubin.

Then a cleric and his army. Why the familiar face of Muqtada al-Sadr may play spoiler in Iraq.

Also, an assassination 100 years ago sparked the outbreak of World War I. Some say 2014 feels a lot like 1914. We'll explore.

And Washington D.C. is broken, that's a fact, but America still works and works pretty well. I will take you somewhere that succeeds where the federal government has failed on immigration.

But first here's my take. In recent days much of the political chatter inside the beltway has been about Hillary Clinton and her wealth or lack thereof. But Mrs. Clinton's problem is not her money. Despite the media flurry based on a couple of awkward remarks she made, most people will understand her situation pretty quickly. She wasn't born rich but has become very rich and are unlikely to hold it against her. Mitt Romney did not lose the last election because of his wealth. Hispanics and Asians did not vote against him in record numbers, for example, because he was a successful businessman.

Hillary Clinton's great challenge will be to decide whether she represents change or continuity. Mrs. Clinton will make history in a big and dramatic way if she's elected as the first woman president, but she will also make history in a smaller, more complicated sense as well. She would join just three other non-incumbent since 1900 to win the White House after their party had been in power for eight years. She would be the first to win who was not the vice president or the clear protege of the incumbent president.

Let me give you some examples to clarify. Only three candidates who were not running as incumbent presidents have run a third or fourth term for a party since 1900. William Howard Taft, Herbert Hoover, and George H.W. Bush, Bush Sr. Six others tried and lost. James Cox, Adlai Stevenson, Richard Nixon in 1960, Hubert Humphrey, Al Gore and John McCain.

Interestingly, even the three successful ones, all had only one term in office, but the challenge for Hillary Clinton can be seen through the prism of her predecessors. Should she run for change or continuity? The three who won all ran firmly as proteges of the president, promising to extend his policies. They also ran in economic good times with popular presidents. That's not always a guarantee, of course. James Cox promised to be 100 million percent behind Woodrow Wilson's policies. But since Wilson was himself wildly unpopular, as was his signature policy, the League of Nations, Cox received the most resounding drubbing in the popular vote in history.

Today the country is on a slow recovery and President Obama's approval ratings are low. That might suggest that the best course would be for Hillary Clinton to distance herself from her former boss. But Obama, Obamacare, and other policies of this president are very popular among many Democratic groups. And remember, the three people in her shoes who have won all ran on continuity.

Now Mrs. Clinton's recent memoir suggests that she has not yet made up her mind as to what course she will follow. The book is a carefully calibrated mixture of praise and criticism, loyalty and voice such that she can plausibly go in whatever direction she chooses. Now the world today is different and Hillary Clinton is in a unique position, especially if she can fully mobilize women voters. But history does suggest that choosing change or continuity, that will truly be her hard choice.

For more, go to CNN.com/fareed and read my "Washington Post" column this week.

Let's get started.

According to an important dramatic new report, the future could bleak for most Americans. By mid century it says $23 billion of property will likely be underwater literally in Florida alone. Crop yields in the Midwest will probably be down 50 percent to 70 percent. Americans will likely experience two to three times as many days with temperatures above 95 degrees as they do today. All this the report's authors say if we don't do something about climate change now.

The report has serious pedigree. It was released this week by an organization called Risky Business.

Joining me now to talk about it are two former treasury secretaries, one from either side of the aisle, who are both heavily involved in the Risky Business organization. Hank Paulson is a co-chair of the group. He was the 74th Treasury secretary serving under President George W. Bush and Robert Rubin is a member of the organization's risk committee and was the 70th secretary of the Treasury serving under President Clinton.

We'll talk about the U.S. economy in a moment, but let's start with this report.

Gentlemen, thank you so much for joining me. The most interesting thing about this report is the sort of idea of the cost of inaction and what would be the cost of doing nothing. And you say it's pretty high.

HENRY PAULSON, U.S. TREASURY SECRETARY UNDER PRESIDENT GEORGE W. BUSH: Yes. I think the cost of inaction is quite high because it's actually radical risk taking. There's a tendency for people to say let's wait until we get more information, but the longer you wait, you get to a dangerous -- a dangerous position where the only things you can do then is to adapt to these adverse consequences as opposed to being able to prevent them because one of the things that I think is pretty clear is that if we act soon, we can avoid the most adverse consequences.

ZAKARIA: Hank, in his "New York Times" piece makes an analogy between the sort of not doing anything and allowing these risks to grow to the situation before the financial crisis where the United States may have done too little to be aware of these risks and then the whole thing explodes. Do you think that analogy works?

ROBERT RUBIN, U.S. SECRETARY OF THE TREASURY UNDER PRESIDENT CLINTON: Well, I think it was a terrific op-ed piece. I think the analogy tells us something, Fareed, but I think the distinction it seems to me is that with the financial crisis, virtually nobody -- a lot of people saw excesses, but virtually nobody saw the possibility of a megacrisis. Here we see it and we know that it can be catastrophic. We must act and yet we're not acting except in a limited way.

ZAKARIA: Now, as you know, one of the principle reasons why very little is happening in Washington is that much of the Republican Party really does not -- would not agree with virtually anything you've said and virtually anything you wrote in that op-ed. How to think about this, what to do about it?

PAULSON: Well, Fareed, I think there are a lot of fellow Republicans, my fellow Republicans, business leaders and political leaders, that are ready for a serious discussion about the science and the risks that come out of the science, and I think the resistance to doing some of the things we need to do is much broader than just Republican Party.

ZAKARIA: But you have a solution which is a carbon tax which is completely anathema to Republicans at least on Capitol Hill.

PAULSON: What I said about a carbon tax, if some people that oppose it are opposing it because they don't like the government playing a big role, and, you know, the perverse aspect of that is frankly those that are resisting, taking action now, are guaranteeing that the government will be playing a bigger role because we're seeing now and we're going to see an increasing number of natural disasters, Mother Nature, actually, we have forest fires, we have floods, we have big storms and storm surges. We have killer tornadoes, and what happens?

When those events occur, one part of society gets hit particularly hard and government comes in. And that's a role of government. Government should come in, but we all pay. ZAKARIA: So a number of people who support the general idea say,

look, we're not going to get a carbon tax in the United States and let's be real. Let's accept the fact that we're going to have to deal with a lot of second best solutions which are fuel efficiency standards -- you know, net metering. Do you think that's the better path to go or is it worth holding out for what seems very improbable?

RUBIN: I wouldn't phrase it the way you just did, Fareed. If you -- if you have the view which Hank and I both have that the risk here is catastrophic and catastrophic to life on earth as we know it, and that's a risk we cannot take. And once you start with the recognition that this could be catastrophic, then it seems to me you do a full- court press on all fronts.

ZAKARIA: A lot of people will listen to this and say we can do all that we want here in the United States. The Chinese and the Indians are building coal fired power plants every week. The Chinese by some measures, one coal fire power plant each week and the Chinese by somewhat measures the one new coal power plant each week, and that's could have changed the climate no matter what happens in the United States. What do you say?

RUBIN: Fareed, I think the answer to that is not complicated. This is a transnational issue that's going to affect all of our countries. It is of enormous importance to all of us, as I said catastrophic risk. I think as I've said catastrophic risk. And I think that the way the United States can best contribute is, A, get our own house in order and by getting our own house in order put ourselves in a much better position to then work with the Chinese and others around the world. So that everybody does what they need to do.

ZAKARIA: I'll be back in a moment with much more with these two former treasury secretaries. They will give us their sense of the American economy and the outlook ahead when we come back.

(COMMERCIAL BREAK)

ZAKARIA: Hank Paulson and Bob Rubin are back with me now to talk about the economy.

I think it will be fair to say that in general the American people feel like the American economy is out of the recession, you know, that we're back to employment levels that the United States had in 2007, but nobody feels satisfied. What is your sense of the picture of the American economy?

RUBIN: Yes. I think my reaction a little bit is to differ with the premise as you've stated it, Fareed. The unemployment rate doesn't reflect our labor market situation unfortunately. There are the so- called -- there are all kinds of other groups of people that are not included in the unemployed. And also --

ZAKARIA: Stop looking for work?

RUBIN: Stop looking for work or people that are part-time employees and would like to look for full time. So the unemployment rate, whatever it is, is probably a few percentage points higher than the reported rate. In fact what we had was a slow recovery. We've had a slow recovery for a long time. It might be heading to I think a little bit better or it may not be. I'm a little less inclined to think it is but, you know, time will tell.

The way to get out of this, the way to move from here to a strong recovery is through policy. And there's so much we can do. You can put in place a fiscal program, that government of the sequester that had an upfront stimulus and then at the same time real fiscal discipline that deferred the implementation of --

ZAKARIA: So spend money now but do some structural budget reform later.

RUBIN: Exactly.

ZAKARIA: So that entitlement programs --

RUBIN: Exactly. And I think that would have substantive effect and (INAUDIBLE). There's so much we can do. The problem is our political system is, as you well know, in dysfunction. Congress is unwilling to act. And I think fundamentally our future depends both for the short term and the long term on a recovery of effectiveness and our political system which fundamentally means the willingness of people with different views to engage in principled compromise. And that is how our system works.

ZAKARIA: We would have a stronger recovery if we could enact the Bob Rubin program stimulus now, cuts later?

PAULSON: Yes. I would say this. I agree with almost everything Bob said, that we have a very small recovery, that there are structural problems that, you know, don't come out in the unemployment numbers. They are more significant. Again, I believe that the solution is bipartisan compromise to get some structural things done. I think we need a new tax policy, a tax policy that gives us the revenues we need and lets us be competitive. I think we -- I think trade policy would help.

I think that immigration reform would make a huge difference and so as we focus on the budget, we need to do it in a way in which we -- you know, we don't cut so much we hurt the fledgling recovery and we don't raise taxes so much that we -- that we do that.

ZAKARIA: The chair of the Fed says the stock prices are within historical norms. Do you agree or do you think they're too high?

RUBIN: Fareed, I have no idea with all due respect to the chairwoman of the Fed who I know well and have a lot of respect for. She doesn't know either. We've certainly had enormous increases in stock prices, where they may or may not be in excess. I don't know. But whatever the answer may be is to that, they'll correct because markets that are overpriced will correct them their own way.

ZAKARIA: Final question. Hank, listening to you on climate change, I think you are for immigration reform, a need for perhaps some stimulus up front and structural reform later, it's difficult to see a -- meet a lot of elected Republicans who would agree with you. Are you feeling lonely in the Republican Party?

PAULSON: Well, let me tell you, I am a Republican and I think you're seeing a growing number of Republicans that favor immigration reform. I will bet that Republicans are very interested in having a very serious conversation about the risks -- economic risks associated with climate and with a number of economic issues. And, remember, when it -- when it came to, you know, the sorts of things I would be suggesting that are structural reforms to have to do with health care and Social Security, I think those are major -- major structural reforms that are necessary.

I think immigration reform is necessary, tax reform. So I think the Republicans are interested in those things. But --

(CROSSTALK)

ZAKARIA: Draft you for president.

Gentlemen, thank you very much.

PAULSON: OK.

RUBIN: Thank you, Fareed.

ZAKARIA: Coming up next on GPS we will tackle Iraq. I will try to make you understand why its prime minister is behaving the way he is. Hint, he has to worry about his tea party.

(COMMERCIAL BREAK)

ZAKARIA: Now for our "What in the World" segment. It seems that everyone, President Obama, John Kerry, NATO, Grand Ayatollah Sistani, even the Iranian government -- has the same advice for prime minister of Iraq, Nuri al-Maliki. Form a broad-based inclusive government that reaches out to the Sunnis. That would take away some of the sense of grievance that fuels their support for radical Sunni groups like ISIS that are threatening Iraq's existence as a nation.

So why in the world is Maliki flatly refusing to do this? Partly is because he's a hard line Shiite politician himself whose party draws its support from the Shiites who are not particularly well disposed to the notion of being nice to the Sunnis, their former overlords. But it's probably at least as much because Maliki needs to worry about radical Shiites as much as radical Sunnis. You see, he has his own tea party, and this one has an army of its own.

Last Saturday members of the group formally called the Mahdi Army now called the Peace Brigades paraded through the streets of Baghdad by the tens of thousands displaying their readiness to supposedly protect holy sites and shrines. The group's name might be new but its leader is a well known figure in Iraq and dominated the U.S. media during the American occupation.

Remember the name Muqtada al-Sadr? He is the radical Shiite cleric who fiercely opposed the U.S. occupation of Iraq. Back then the Mahdi Army was responsible for some of the deadliest days of the war, then he overplayed his hand. The U.S. got other Shiite leaders to turn on him, issue an arrest warrant and in 2007 he fled to Iran where he sought exile and supposedly studied theology.

But when he returned in 2011 his followers remained loyal to him and he wields real political power in Iraq. Al-Maliki got to keep his job as prime minister after an inconclusive election in 2010 largely because Muqtada al-Sadr helped him to build a coalition thereby ending months of political deadlock. Since al-Sadr has called Nuri al-Maliki a dictator and in a very surprising twist, recently added pressure on him to step down by calling for the creation of a new emergency government right after Maliki rejected the idea.

Al-Sadr urged the Iraqi government to incorporate moderate Sunnis who have been marginalized in order to quell the bloodshed. Now al-Sadr appears to be trying to become the new power broker of Iraq condemning ISIS and the Sunni terrorist groups but also appealing to moderate Sunnis. Whether or not he succeeds we are probably witnessing serious splits in the Shiite coalition and that can only mean more chaos in an already chaotic situation.

A piece in foreign affairs points out that recent events are the re- ignition of the 2006, 2007 Iraqi civil war and that they fit a pattern. Over a third of all ethnic civil wars, the author said, flare up again within five years. What's more, approximately 1/3 of all power sharing arrangements borne out of those conflicts also fail within that time period. It's true of Angola, Afghanistan and Sri Lanka in history. And now it's true of Iraq.

When we come back, something to cheer you up even more.

World War I started 100 years and one day ago with a minor assassination in the Balkans. Could some similar spark in the Middle East unsettle the world today?

We have a great panel to discuss this.

(COMMERCIAL BREAK)

ZAKARIA: 100 years and one day ago Archduke Franz Ferdinand, heir to the throne of the Austria Hungarian Empire was being driven down the streets of Sarajevo when he was assassinated by Gavrilo Princip, and a crew of fellow Serbian nationalists. Exactly one month later Austria Hungary declared war on Serbia and thus began the First World War. Today some people are pointing out geopolitical similarities between 1914 and 2014, similar dynamics of rising powers, falling powers, new technologies, and dangerous tinder boxes. I wanted to explore that. Joining me to do so are former CIA Deputy Director John McLaughlin who had a new piece on Ozy.com titled "How 2014 Is Strikingly Similar to 1914." Historian Geoffrey Wawro, author of "A Mad Catastrophe, the Outbreak of World War I and the Collapse of the Hapsburg Empire" and Walter Russell Mead, professor of foreign affairs at Bard College. John, why don't you start us off since your piece started us (INAUDIBLE). What do you see as the principal similarities between 1914 and today? JOHN MCLAUGHLIN, FORMER CIA DEPUTY DIRECTOR: Well, there are two or three. We had a tinderbox in 1914. It was called the Balkans. Today we have a tinderbox in the Middle East, a situation which could easily spin out of control in exactly the way that the Balkans took things out of control in Europe in 1914. We also have the geopolitical rivalry that looks similar in some respects today, it's between China and the United States. Back then, of course, it was between Britain and its empire which was on the verge of decline and a rising Germany. Also, I think today we are lulled by the prospect of globalization will somehow save us from catastrophe because we are so interdependent globally. Back then they had the same illusion. They thought that things like steam engine, the telephone, the telegraph, air power, such, that that would save them because they were becoming increasingly interdependent.

ZAKARIA: Walter, when you listen to these similarities, where do you come out?

WALTER RUSSELL MEAD, PROFESSOR BARD COLLEGE: Biggest similarity is that the same problem that helped drive World War I and the Balkans, the bad fit between state boundaries and then nationalism, these popular forces of identity, culture, language, we see that all over the Middle East today and that's driving a lot of conflicts.

ZAKARIA: The Sunni ...

MEAD: The Sunni/Shia divide, but also the Kurdish question, Israelis Palestinians. Nationalities whose identities are weak. Syria and Iraq are both kind of multi-communal states and they're not holding up well. And we see these forces ripping them apart in the same way they were ripping apart the great empires at the start of World War I.

GEOFFREY WAWRO, AUTHOR, "THE OUTBREAK OF WORLD WAR I AND THE COLLAPCE OF THE HAPSBURG EMPIRE": And yet there's a kind of indifference, I think, on the part of the great powers regarding the Middle East that didn't apply in the Balkans. The Balkans was a hotly contested area in 1914. Because the Austro-Hungarian saw their future spreading down through Macedonia to Salonika, but the Russians, on the other hand, saw their future getting control of the Turkish Straits, getting control of the Balkan Peninsula to control the eastern Mediterranean. And I think we have this real sense of Middle Eastern fatigue among the great powers today who look at this, and they have interest there, energy, security, client states, ports on the Mediterranean in case of the Russians and Syria, and yet they're not willing to go all in in the sense that they did in 1914. I think that's a key difference.

MCLAUGHLIN: I'd like to push back on that a little bit because I think there's a similarity there, too, in the sense that in 1914 there were certain things that great powers couldn't tolerate. Britain couldn't tolerate Germany on the Channel, Germany couldn't tolerate Russia mobilizing. Today I don't think in the end the United States can tolerate a terrorist state occupying territory in the Middle East, which is where this situation is going. I don't think Iran can tolerate in the end a Shiite power next to it that is defeated and I doubt that the Saudis can tolerate in the end a Shia crescent, which stretches across that part of it. ZAKARIA: So, this is a very important point. Because I was struck,

as Geoffrey was, that the big difference that strikes me is then the great powers were really eager to get involved in jockeying for advantage. Right now the great powers are almost trying to stay out, but you say they will get sucked in in the end?

MCLAUGHLIN: I'm saying that I think the prospects are good that they get sucked in in some way. It won't look exactly like 1914 because it is 100 years later. The weaponry is different, the ways of influencing people are different. We have social media, we have cyber, we have all of the things that can bring potentially surprises just as machine guns and air power and such brought surprises with ...

WAWRO: The other powers were dead set against the Balkan inception of the war. The only ones that were eager to have a Balkan inception were the Russians and the Austrians.

ZAKARIA: Meaning ...

WAWRO: The French, the British, the Germans, all didn't want (INAUDIBLE) against the Balkans. They didn't see anything in the Balkans as being worth the war. They got in basically to maintain their alliances.

This is where the parallel is somewhat forbidding because, you know, it could be a case where we feel we need to back somebody to show credibility -- to demonstrate credibility. Demonstrate strength and not to lose influence over that client or not to lose influence over adversaries. That's sort of how Britain and France and Germany got involved in this war in the Balkans.

ZAKARIA: And Walter, would that apply to Iraq that we would get in because we want to show the Iraqi government we ...

MEAD: Well, it would be less the Iraqi government than the Saudis in a sense because, you know, the sense that the Sunni/Shia war is really a proxy war between Iran and the Saudis. The biggest difference, though, that I actually see is in 1914 you had Germany, a rising power and then all around it every other power in Europe was in decline. You look at Asia today, Japan doesn't really feel that it's declining. Vietnam is a rising power. There are a lot of rising powers in Asia. It's a different kind of dynamic. It's explosive, potentially, but it's different.

WAWRO: Asia, certainly, the area that's most redolent (ph) of these 1914 tensions, because you do have a rising China that reminds one of Germany, challenging the might of Great Britain, you know, sea power and also its just imperial reach and this is an area given the U.S., you know, pivot there, putting troops into Australia, making alliances with Vietnam, with the Philippines, trying to encircle China. Remember, Germany goes to war in 1914 because they feel encircled by these (INAUDIBLE) alliances. There you see the tensions.

ZAKARIA: But last word to you, John. We may not be interested in the Middle East, but the Middle East is interested in us. Paraphrasing Trotsky (ph), that's your concern, right? MCLAUGHLIN: Yes. What starts in the Middle East never stays in the

Middle East. And there's an important aspect of the decision making now that I think needs to be highlighted, and that is to a greater degree than any other situation I can recall, there are no good choices in the Middle East. Every choice you make has a very serious downside, which demands a great deal of political courage to make a choice, but the problem of not making a choice is that you are making a choice.

ZAKARIA: We're going to have to leave it at that ominous - on that ominous note. Gentlemen, thank you very much. Fascinating discussion.

Coming up next, Washington is broken, everyone agrees on that, but we are going to show you where America is working and working pretty well. Where the two parties cooperate, government and business team up, and good results follow. We're going to kick off a brand-new "GPS" series with America's unlikely capital of immigration when we come back.

(COMMERCIAL BREAK)

ZAKARIA: Everyone knows that Washington is utterly polarized, but we focus too much on Washington, I think. American government is actually succeeding in a crucial zone, America's cities. For the next five weeks I'll be taking you to areas around the country where America works. Here's our first installment. A city that is making immigration work. Eric Cantor's stunning defeat. The first time in history, a House majority leader lost in a primary may have killed any chance of overall immigration reform from Washington, but many states are finding a way to make immigration work for them. And despite being in a state with a 1241 mile border with Mexico, Houston, Texas, is attracting, integrating, and celebrating immigrants, defying many stereotypes in the process.

(BEGIN VIDEOTAPE)

ZAKARIA: In Houston in the 1930s a big factory reportedly had a sign over its hiring office, it said, "No Mexicans hired here." In 1967 racial tensions between whites and blacks led to a riot. In 1978 another riot, this time the dispute between whites and Hispanics. And then everything in Houston changed.

UNIDENTIFIED FEMALE: The decline in oil prices and demand is having a bad effect on the overall health of the golden city.

ZAKARIA: During the 1980S the liquid gold that surrounds Houston plummeted in value. From $34 a barrel to less than $10. Rice university's professor Steven Klineberg says Houston experienced the worst regional recession that had been seen anywhere in the U.S. since the Second World War.

STEVEN KLINEBERG, PROFESSOR, RICE UNIVERSITY: 82 percent of all the primary sector jobs in Houston in 1980 were tied into the oil business. ZAKARIA: That single industry town was very white in 1980. More than

65 percent white. African-Americans accounted for less than 1/5 of the population. The Houston metro area was less than 1/5 Hispanic despite being one of the closest big American cities to the Mexican border, which is approximately 350 miles away. The Asian population was barely a blip, under two percent.

And what does Houston look like today?

KLINEBERG: You tell people that - you tell people outside of Houston, this is the most ethnically diversity in the country, they look at you like - you're crazy. This is impossible - This is Texas. This is George Bush country.

ZAKARIA: But it is possible. Take a look at that graphic of Houston's demographics in 1980 again and now look at it today. It's a pretty even breakdown. Minorities are the only majority. Blacks are 18 percent, Hispanics 41 percent, other ethnic groups make up about eight percent, and whites are 33 percent.

And it's biracial southern city dominated and controlled throughout our entire lives by white men has become the single most ethnically diverse large metropolitan regions in the country.

And as the demography has shifted so dramatically in the last 30 years, what happened at the same time with the economy? It's gone from bust to recovery to bust, but now once again it is booming. Of course, oil prices have quadrupled over the last decade, but the growth is also thanks in part to immigration.

MAYOR ANNISE PARKER, HOUSTON: We may have the hottest economy in the United States. Clearly we have a very hot job market right now and we're doing well in job creation.

UNIDENTIFIED MALE: How are you doing tonight?

PARKER: Thank you. Thank you.

ZAKARIA: Houston's current mayor Annise Parker is understating the facts.

PARKER: Pleasure to meet you.

ZAKARIA: Houston was the first city to regain all of the jobs it lost in the 2008 recession. It actually created more than two jobs for everyone it lost. That job creation has been a driving force behind the changing face of Houston.

PARKER: In order to fill those jobs, we attract some of the best and the brightest from around the world.

ZAKARIA: And the city has done just that. Today one in five Houstonians was born in another country. But those immigrants, of course, don't come here and realize the American dream on day one. Many immigrants land in Houston right here in Gulfton. What some call the city's Ellis Island, the most densely populated 3.4 square miles in the whole city?

ANGELA BLANCHARD: I tell people, the way you know who's coming to Gulfton next is look at the world. Where are the points of pain and unrest? They'll be here. They're coming.

ZAKARIA: The tired, poor, huddled masses that came to Gulfton needed help integrating into American culture. Some arrived with striking education deficits among other tough problems.

BLANCHARD: So the meeting we have ...

ZAKARIA: And Angela Blanchard, the president and CEO of the non- profit Neighborhood Centers says Gulfton was a place to be avoided.

BLANCHARD: You drove around it. The police said, gosh, we hate to even go there. And that was the story on the street about Gulfton, nothing good happening there.

ZAKARIA: But the whole of Houston seemingly came together to try to transform Gulfton. The city government, private enterprise, and the civic community. It was 2008 in the midst of a national recession and election.

SEN. JOHN MCCAIN (R) ARIZONA: We have to secure the borders first.

BLANCHARD: Every night on TV there was another diatribe about immigration, about how horrible it was, and then every day I would go back out again to raise money. Actually no, that's not true. Here's what these folks have come to. Here's what they've figured out on their own and the gains they've made, the businesses they've started. This is how enterprising and industrious they are. Then in true Houston fashion, people got interested.

Do you see it being funded like ...?

ZAKARIA: Neighborhood Centers CEO Angela Blanchard was able to cut through the partisan rhetoric and get Democrats and Republicans on board. Together they raised $25 million to build the Baker-Ripley Neighborhood Center which opened in 2010 and this five building, four acre complex offers services ranging from tax preparation to low-cost banking, a clinic.

UNIDENTIFIED FEMALE: Will they be on time for English class?

ZAKARIA: And even classes in English as a second language.

BLANCHARD: These children won't know any better. This is the world they'll know and remember. And now that is a powerful way to make a community safer. Belonging is the most powerful medicine.

ZAKARIA: Since the center opened, crime has decreased 11 percent in Gulfton. In Houston overall, crime is down four percent.

One final point on demographics. Remember that pie chart of Houston's racial and ethnic makeup today? Well, it's not too dissimilar from this census projection for the entire country. In 2060, about 52 percent of Americans will be minorities and no single ethnic group will have a majority. Rice University professor Steven Klineberg.

KLINEBERG: We're about 25, 30 years ahead of the rest of the country. All of Americans is in this transition from a (INAUDIBLE) European nationalities microcosm the world. (INAUDIBLE) how Houston navigates this transition, will have enormous significance not just for the Houston future, but for the American future. This is where the American future is going to be run.

(END VIDEOTAPE)

ZAKARIA: It's worth noting here that in addition to being the most diverse city in the country, Houston is also one of the most segregated cities in America both by ethnicity and income. It still has work to do.

Up next, what's wrong with this picture? We'll tell you after the break.

(COMMERCIAL BREAK)

ZAKARIA: This week, India's newly elected Prime Minister Narendra Modi surpassed the White House twitter account in number of followers when he reached 5 million. In the short time since his election, his victory tweet, "India has won!" was retweeted more than 70,000 times and favorite, if that's a verb, by 46,000 people. It brings me to my question, who is the most influential world leader on Twitter today, not in terms of followers but by rate of retweets, Barack Obama, Pope Francis, the Dalai Lama, or Narendra Modi? Stay tuned and we'll tell you the correct answer.

This week's book of the week is David Ignatius' "The Director." It's another superb espionage thriller from Ignatius. This one set in the world of cyberspace and agencies like the NSA. It reads like it's from the front pages and it brings you vividly into the strange world of hackers. Absolutely fascinating.

Now for the "Last Look." Take a look at the Bolivian congress. Does something look amiss? Look closely and you'll see the numbers on the clock are reversed on purpose. You see modern-day clocks reflect the way that a sun dial shadow travels in the Northern Hemisphere. This clock was reversed to reflect Bolivia's position in the Southern Hemisphere. The foreign minister said that this clock of the south was installed so that Bolivians would embrace creativity and question the status quo. A symbolic change like this isn't unique to Bolivia, of course. Venezuela's Hugo Chavez changed his country's 200 year old flag by adding an eighth star in tribute to Simon Bolivar. He changed the direction of the horse in the Coat of Arms faces from right to left declaring that the horse had been freed. Critics at the time pointed out it was costly to free the horse from passports, currency, and other government documents. In Africa Malawi's former president changed the flag's rising sun to a sun that had fully risen. He wanted the flag to imply Malawi wasn't developing, it had developed. These may be clear symbols, but what doesn't seem clear to these leaders, you can change a horse's direction, a sun's position, or even what clockwise means, but your country's successes will still be based on the substance of your policies, not the style of your symbols. The correct answer to our GPS Challenge question is B, Pope Francis. Barack Obama's personal account has the most Twitter followers at more than 43 million, but according to a recent study by the PR from Burson-Marsteller, Pope Francis is retweeted much more frequently. @Barackobama's tweets are retweeted in average of 140 times each. The pope's Spanish tweets alone are retweeted more than 10,000 times each. He even has an account in Latin. Thanks to all of you for being part of my program this week. I will see you next week.

ERIN MCPIKE, CNN ANCHOR: Good morning. I'm Erin McPike and here are the big stories we are following this hour. Another shocking twist in the case of a Georgia toddler who died after his dad left him locked in the host car. CNN just learned that the boy's mother told authorities she also previously researched child deaths in hot vehicles and how they occur. Just yesterday search warrants revealed that the boy's father had conducted a similar search. Police say the father stated he was fearful that this could happen. He is charged with murder in his son's death.

Near record rainfalls in Minnesota continue to cause widespread flooding. Another one to two inches of rain is expected later today in the twin cities area where residents continue to battle rising waters. Some 40 homes in the city of Prior Lakes have already been flooded.

Heavier rains and the risk of hail and tornadoes are expected in other parts of the state.

New Orleans police are looking for a suspect following a shooting on Bourbon Street that sent seven people to the hospital. At least one person is still in critical condition, the other six are in stable condition. The shooting happened in a very busy area of the French Quarter. I'm Erin McPike in Washington. "Reliable Sources" starts right now.